2 We see the unlimited opportunity to achieve long-term profitability while addressing societal needs. As a signatory of the PRI, together with Apimec and BM&FBOVESPA, Cornerstone Capital Group believes that integrating Environmental, Social and Governance (ESG) factors into investment processes throughout the capital markets leads to extraordinary insight. Better perspective allows us to help analyze the right investment opportunities for you, your clients and customers while benefiting people and planet. Whether you seek global research insight, capital introductions, investment banking, or private client investment consulting, we can help you achieve sustainable returns. Visit us at cornerstonecapinc.com for more information and to learn more about the Journal of Sustainable Finance & Banking SM.

23 The crisis is parked in government debt, which is a global (not a regional) problem... (1.) Financial crisis 2007/08 (2.) Economic crisis 2009/10 (3.) Debt crisis until now Sources: Erste Group Research, The Banker

24 The global crisis has caught up with us again, holding us in a tight lock (2.) Economic crisis Loss of trust in the financial system Deficit (1.) Lack of liquidity? Financial crisis Sectors and real economy negatively affected Bail-out packages by central banks and governments Debt Volatility (3.) Debt crisis Loss of confidence Austerity measures Uncertainty Source: Erste Group Research Panic and fear on the financial markets Debt crisis will be a sustainable challenge for us

27 We do have a lot of unsolved problems worldwide Trust E S G On a global scale, the discussion is still at the beginning! etc.,.. Source: Fritz Mostboeck for EFFAS

28 What is ESG? It s not a communist approach not a religion not a pseudo-moralistic view not a green policy concept not a bill of goods not an I-know-it-better approach Tool that seeks to respond to the failures of the past and prevent those of the future. ESG should be understood as everyone s responsibility (extensive stakeholder approach). Source: Fritz Mostboeck for EFFAS

29 ESG What are the benefits of ESG? ESG is not a marketing gag. Differentiation effectively creates: 1. Competitive advantage, 2. Higher reputation, 3. Confidence. These ingredients are the basis for the sustainable success of a company. Therefore, applied ESG increases a company s value.

30 ESG Long-term consequences ESG is a topic of global significance and will gain greater acceptance. Investor awareness has to be raised substantially. Capital market can only cover listed companies. The capital market is best suited to implement objectives for the common good.

31 ESG Advantages of the capital market > Wide transparency is honoured, lacking is sanctioned, > Soft facts are measured by the share price as well, > ESG and the capital market stands for performance orientation, > Generation of a common good, > Efficient allocation of financial resources, > Capital markets are the best-suited medium for a comprehensive evaluation (including soft facts) because: > Stocklisted companies => represent the bulk of global GDP (~85%, bonds are ~140%/ government- and corporate bonds). Major disadvantage for the moment: Investor awareness, but: -> public pressure is - from different sides - increasing.

32 ESG What is our goal? ESG / Corporate Responsibility: -> Has to become mainstream! Input - Throughput - Output: ESG should be understood as everyone s responsibility (in the sense of a stakeholder approach)!

65 Objectives Explain the concept behind the ESG Investor Briefings and details of the newly developed Value Driver Model toolkit Explore how the Briefing concept and toolkit can be utilized, with input on future activities and additional resources

66 Agenda 1. The Communication Gap Current state Closing the gap between companies and investors 2. Enhancing Dialogue with the Value Driver Model 3. Moving Forward

67 Why are we working on this? Convergence between priorities of UN and international business community

68 Key Findings from 2013 UN Global Compact/Accenture CEO Survey 1. 49% of CEOs said potential for revenue/growth and cost-savings were among their top three drivers for taking action on sustainability 2. 80% reported they are pursuing sustainability as a source of revenue growth and innovation from which they expect to derive competitive advantage 3. 47% of CEOs said customer demand drove them (up from 39% in 2010) 4. Only 38% said they could quantify business value 5. 69% thought investor interest would be increasingly important 6. Only 12% reported investor interest today 7. 93% thought sustainability would be important or very important to the future success of their business Source: The UN Global Compact-Accenture CEO Study on Sustainability 2013

69 The Disconnect on Sustainability Problematic because sometimes lack of perceived investor interest limits management s willingness to commit according the 2013 Accenture-Global Compact survey only 12% of CEOs report pressure from investors as a factor in taking on sustainability issues Understandable because the current models for sustainability reporting were not intended to highlight financial upside and do not easily align with analysts financial models Addressable because what is required from companies is simplicity in communicating the value already being realized Source: The UN Global Compact-Accenture CEO Study on Sustainability 2013

74 S/GPR: How to Operationalise the Value Drivers S/Growth (S/G) Key Challenge: Categorization Is it meaningful to categorize revenues in your company? Why measure this? Companies are investing significantly in building new sustainability-advantaged products, but it can be difficult for investors to assess how these new products impact revenue growth or what percentage they are of total revenue. Sustainability Quality of Revenue = Sustainability-advantaged revenue as a % of total revenue in the period Is it material to the business? That is, are sustainability-advantaged revenues an important component of the business mix? Relative Growth Rate of Sustainability-advantaged revenue to Overall Revenue = Sustainability-advantaged Revenue Growth % / Total Revenue Growth % Messaging regarding S/G Is it currently a material or significant component of the revenue mix? Is it strategic to the company s future? That is, are sustainability-advantaged revenues growing significantly faster than the business overall, thereby likely to grow in importance over time?

75 S/GPR: How to Operationalise the Value Drivers S/Productivity (S/P) Key Challenge: Aggregation Is it possible to count the total dollars saved or cost avoided? Why measure this? While some investors appreciate anecdotal evidence of meaningful gains from improved resource productivity, aggregating and communicating the total value of savings in the reporting period can help engage them on sustainability. Contribution to operating income from all sustainability-related initiatives in the period = Aggregated resource efficiencies (human and natural) as a percent of operating income (e.g., dollars saved / total operating income) Messaging regarding S/P Is it currently material/significant? That is, given the business segment and earnings history, do sustainability-related initiatives taken as a group produce meaningful cost savings? Is it strategic? That is, in the context of business operations, is it anticipated that sustainability-related initiatives will drive cost structure advantages over time?

76 S/GPR: How to Operationalise the Value Drivers S/Risk (S/R) Key Challenge: Focus Is it possible to identify a few key risks to revenue and reputation and report on them over time? Why measure this? It is sometimes difficult for investors to zero in on what the company, often in consultation with external advisors and stakeholders, regards as its key sustainability-related risks. Identifying and reporting on them over time gives investors insight into this potential source of revenue and earning volatility. Measureable reduction in potential risk to revenue and reputation from sustainabilityrelated initiatives and procedures Is it material? That is, are the identified risks a potential source of meaningful revenue and/or earnings volatility? Is it strategic? That is, does superior management of these risks position the company to reduce volatility?

81 Determine S/G 1. Does your company s business strategy link clearly to sustainabilityrelated factors, including products or services that: Deliver the intended value to customer, but at significantly lower environmental or social impacts than other available solutions Fall under the broad definition of sustainability-advantaged 2. Does your company seek enhanced brand value that impacts growth through strategies in sustainability-related areas (e.g. sourcing and human rights)? 3. Does your company measure or have an interest in measuring these factors as a component of overall growth? If yes, the Value Driver Model may be useful to your company

83 Determine S/R Has your company developed a focused list of the key sustainabilityrelated risks to revenue and reputation? Have you measured the performance of these key sustainabilityrelated risks on some periodic basis to track progress? If yes, the Value Driver Model may be useful to your company

84 Agenda 1. The Communication Gap 2. Enhancing Dialogue with the Value Driver Model 3. Moving Forward How can you use this, starting today? Feedback e.g. What additional tools need to be developed?

85 Moving Forward-Using the Value Driver Model Adapt the Value Driver Model to your company context. Identify case examples of how your company applies one or more elements of the Value Driver Model to their business Integrate the metrics from your company s Model into mainstream investor communications e.g., host an ESG Investor Briefing Track your efforts and investor reactions Share your progress and feedback with the Global Compact PRI team.

86 ESG Investor Briefings The ESG Investor Briefing Project, organized by the UN Global Compact and Principles for Responsible Investment (PRI), is designed to improve companyinvestor communications on material environmental, social and corporate governance information. Using the model of quarterly financial calls, it provides a baseline framework for companies to enhance their communication on how ESG strategies and performance can translate into financial value.

92 Introduction EFFAS ESG Training Program Motivation & Modules Motivation The World Economic Forum considered insufficient education and lack of valuation models as the most important barriers of integrating ESG in mainstream investment decision The EFFAS ESG training programme aims at overcoming this challenge. It delivers exactly the fundamentals of ESG investment analysis The programme s objective is to support mainstream and sustainability investment professionals in measuring and integrating ESG in investment processes and providing them with a better understanding of the value drivers of different assets Therefore, the programme combines fundamental company analysis/valuation and ESG know-how. 1. Wake me Up. Is the overall applicability of ESG factors feasible at all? The first module will show participants why the answer to that question is a clear yes. Different studies that link ESG performance with financial performance will be presented and discussed, providing participants with an understanding of how capital markets perceive ESG factors. 2. Fundamentals. The second module describes the motivation, drivers and the regulatory frameworks of ESG. Investment professionals have different motives taking ESG into account. The range is from the objective to enhance sustainability or to have an impact on society to purely financial performance. The drivers of the financial market to integrate ESG information are e.g. regulation, investor demand, data availability. 3. Approaches and strategies. The objective of this module is to define ESG terms and concepts in to have a common terminology and to understand the different ESG strategies that are used to classify ESG investors. As it is essential for further discussions to have a common understanding of the different sustainability terms, their relevance, but also their inflationary use an overview of the history of sustainability and ESG is provided. 4. Investment process chain. This module focuses on how to integrate ESG into investment processes. It delivers the fundamental framework for integrating and valuation ESG data. Different socially responsible investment (SRI) strategies are described. The different steps in the investment process chain like investment policy making, asset allocation, selection, control, and reporting will be analyzed from an SRI perspective 5. ESG integration and valuation. Showcase the integration of ESG in the investment valuation process. At first analyze different valuation models and identify the possibilities to integrate ESG information in equity and bond valuation. Then analyse disclosure and data source which are essential as they determine the scope and quality of input for the valuation model. 6. Portfolio management. In this module a description of approaches of ESG from the perspective of portfolio management follows. Different approaches, such as active or passive portfolio management, indices, ETFs and sustainable benchmark will be discussed. Best in class approach of leading ESG fund managers will be presented. The module closes with a comprehensive overview of using the ESG approach in different asset classes 7. Summary & conclusion: optional multi-asset framework and behavioral aspects 2 1st LATAM ESG 2014 April 2014

93 Introduction EFFAS ESG Training Program - Contributors Prof. Dr. Alexander Bassen is Academic Director of the programme. He owns the Chair of Capital Markets and Management at the University of Hamburg (Germany), Faculty of Business, Economics and Social Science. Gunnar Friede, Senior Fund Manager and Director, DWS Investments (now Deutsche Bank Asset and Wealth Management). Felix Schnella is Senior Portfolio Manager at Ökoworld Lux S.A. Dr. Hendrik Garz is working as Managing Director (Germany) and Research Director for Sustainalytics, Germany. Dr. René Nicolodi is Head of Satellite Solutions in the Asset Management Department of Zurich Cantonalbank (ZKB), Switzerland. 3 1st LATAM ESG 2014 April 2014

96 Some Definition(s) Megatrend: Sustainable Development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs (World Commission on Environment and Development 1987). Companies: Corporate Social Responsibility can be defined as the capacity of companies and organisations to remain productive over time and to safeguard their potential for long term maintenance of profitability. Being sustainable means that companies actively pursue goals such as responsible use of natural resources both in their own operations and the operations of their respective clients, as well as respecting social rights in their markets of operation and those markets where their products and services are in use and being accountable to providers of equity and debt capital (EFFAS). Information: ESG environment, social and governance factors as extra-financial information. Investment Products: SRI (Sustainable and Responsible Investments) are ethical investments, responsible investments, sustainable investments, and any other investment process that combines investors financial objectives with their concerns about environmental, social and governance (ESG) issues (Eurosif 2008, 6) or simply investments that take into account environmental, social and governance (ESG) factors (Scholten/Dam 2012). Investment Process: Integrated Analysis is the process by which ESG information is systematically integrated in the analysis of firms or along the investment decision making process in the construction of investment portfolios. 6 1st LATAM ESG 2014 April 2014

102 The Case It pays! Academic evidence ESG and performance review study; (Analysis of more than 1500 academic sources) Significant body of primary and secondary academic literature on the ESG / Corporate Financial performance link since the 1970s Approach: a. analysis of underlying study samples of previous ESG review studies: total number of analyzed studies > 1500 b. coding of results into positive, neutral/mixed and negative relation Main Findings: More than 85% of the studies show a neutral or positive performance effect relatively stable since roughly 20 years No evidence of a systematic performance loss Source: DeAWM (2014; preliminary) 12 1st LATAM ESG 2014 April 2014

104 Methodology Integration approaches from a investment perspective Source: UNPRI xxx (2013) Use of information Quantifying the benefits and costs of specific ESG factors Identifying risk and opportunitites that traditional investment research may not Identifying the beneficiaries of longerterm structural changes in the economy Examples of ESG integration Investors can integrate their understanding of ESG factors into earnings forecasts or by adjusting the discount rate in DCF valuation. Companies that operate in politically and socially sensitive areas are potentially subject to high operational risk and share price risks in terms of strikes and volatile unstable institutions. Thematic research may be used to identify stocks that are then subject to more detailed analysis or to create a thematic fund. An example of an ESG theme would be demographic change such as ageing populations in many developed countries. 14 1st LATAM ESG 2014 April 2014

107 Methodology Take Aways Strong drivers and investor motives are pushing ESG integration It is all about the use & understanding of additional and relevant information in an investment context ESG Integration in a narrow sense: valuation (firm level) ESG Integration in a broader sense: along investment process (portfolio level) 17 1st LATAM ESG 2014 April 2014

121 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 1 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

122 Corporate reporting in the literature Black Wednesday 1992 Latam crisis 1980 Oil crisis 1973 II World War Vietnam war 1965 Black Friday KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 2 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

123 What is integrated reporting proposing? Integrated is not just to include ESG information From the past to the future Taking decisions based only on the annual report is like driving looking through the rearview mirror Bottom up to Top - down If the Board is defining the strategy why is it missing? Parallel to Focused If time is the most scarce resource in the planet, why are the annual reports not only related to how performance is aligned with the strategy? # KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 3 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

124 What is integrated reporting proposing? Integrated is not just for all the companies Short and long term vision Long term vision is not business as usual. Inclusive view of value If the Shareholders are not unique owners of the company. Transparency is not a problem If the company does not have a strategy, it is difficult to communicate it. # KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 4 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

125 What is integrated reporting proposing? Integrated is not just for reporting Define the strategy Different horizons Organization Incentives Management risk Value oriented organizations Promises Due diligence Innovation Value oriented organizations New roles New scenarios # KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 5 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

126 What integrated reporting is proposing? Short and long term vision Inclusive view of value Transparency is not a problem Define the strategy Management risk Innovation From the past to the future Bottom up to Top - down Parallel to Focused The company The approach The report 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 6 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

127 What is integrated reporting proposing? Integrated is not just to include ESG information Integrated is not just for all the companies Integrated is not just for reporting Company Two approaches In- out Out - in Society 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 7 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

128 Non financial reporting by country 100 largest local companies N KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 8 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

129 Non financial reporting by country 100 largest local companies N KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 9 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

130 Non financial reporting by sector Largest global companies G250 Average quality of G250 reports by sector (Score out of a possible 100) Average quality of G250 reports by criterion G250 companies as a whole score most highly for targets and indicators. The greatest improvement needs to be made in reporting on suppliers and the value chain KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 10 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

131 GRI is the King 100 largest local companies N KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 11 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

132 2 Development of the Guidelines since 2000 Guidelines 2000 G2 G3 G3.1 G KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 12 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

133 Approach based on materiality 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 13 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

135 COM(2013) 207 final amending Council Directives 78/660/EEC and 83/349/EEC as regards disclosure of nonfinancial and diversity information by certain large companies and groups The new rules only apply to large public-interest entities with more than 500 employees, which will be required to disclose certain non-financial information in their management report. These include listed companies as well as some unlisted companies, such as banks, insurance companies, and other companies that are so designated by Member States because of their activities, size or number of employees. The scope includes approx large companies and groups across the EU. Topics to be disclosed Environmental Social impacts Labor conditions Human rights Corruption and bribery What? Policies Results Risk management How? Global compact, Principles for Human Rights and Companies, OECD Multinational principles, ISO and GRI Comply or explain Diversity All quoted companies should report diversity policies including measures to avoid discrimination by age, gender, geographic, social origin, etc. From top to bottom 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 15 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

136 What is integrated reporting proposing? Long term financing Long-term financing embodies some key features: It finances productive activities that support growth by reducing costs, diversifying means of production and creating jobs in a smart, sustainable and inclusive way; It is patient, in that investors take into account the long-term performance and risks of their investments, rather than shortterm price fluctuations. This long-term perspective acts in a counter-cyclical manner and promotes financial stability; It is engaged, in that investors take longer-term aspects such as environmental, social, governance issues into account in their investment strategies KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 16 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

137 What is integrated reporting proposing? Tax disclosure Long-term financing embodies some key features: It finances productive activities which support growth by reducing costs, diversifying means of production and creating jobs in a smart, sustainable and inclusive way; It is patient, in that investors take into account the long-term performance and risks of their investments, rather than shortterm price fluctuations. This long-term perspective acts in a counter-cyclical manner and promotes financial stability; It is engaged, in that investors take longer-term aspects such as environmental, social, governance issues into account in their investment strategies KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 17 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

138 What is integrated reporting proposing? Two approaches Company In- out Out - in Society 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 18 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

139 The International Integrated Reporting Council - IIRC 3 The current focus on the financial statements of an organization is insufficient to answer the question: THE IIRC IS A GLOBAL COALITION OF REGULATORS, INVESTORS, COMPANIES, STANDARD SETTERS, THE ACCOUNTING PROFESSION AND NON- GOVERNMENTAL ORGANIZATIONS. ITS MISSION IS CLEAR: TO ENABLE INTEGRATED REPORTING TO BE EMBEDDED INTO MAINSTREAM BUSINESS PRACTICE IN THEPUBLIC AND PRIVATE SECTORS. How do organizations create value? The financial information covering both financial performance and risk, however, should serve as enough to support investment decisions reflect the integrated thinking and decisionmaking process within organizations KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 19 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

140 Integrated reporting: content elements Organizational overview and external environment: What does the organization do and what are the circumstances under which it operates? Governance: How does the organization s governance structure support its ability to create value in the short, medium and long term? Business model: What is the organization s business model? Risks and opportunities: What are the specific risks and opportunities that affect the organization s ability to create value over the short, medium and long term, and how is the organization dealing with them? Strategy and resource allocation: Where does the organization want to go and how does it intend to get there? Performance: To what extent has the organization achieved its strategic objectives for the period and what are its outcomes in terms of effects on the capitals? Outlook: What challenges and uncertainties is the organization likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance? 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 20 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

141 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 21 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

142 The International Integrated Reporting Council - IIRC The current focus on the financial statements of an organization is insufficient to answer the question: THE IIRC IS A GLOBAL COALITION OF REGULATORS, INVESTORS, COMPANIES, STANDARD SETTERS, THE ACCOUNTING PROFESSION AND NON-GOVERNMENTAL ORGANIZATIONS. ITS MISSION IS CLEAR: TO ENABLE INTEGRATED REPORTING TO BE EMBEDDED INTO MAINSTREAM BUSINESS PRACTICE IN THE PUBLIC AND PRIVATE SECTORS. OUR LONG-TERM VISION IS A WORLD IN WHICH INTEGRATED MANAGEMENT AND THINKING ARE EMBEDDED WITHIN MAINSTREAM BUSINESS PRACTICE IN THE PUBLIC AND PRIVATE SECTORS, FACILITATED BY <IR> AS THE CORPORATE REPORTING NORM. THE CYCLE OF INTEGRATED THINKING AND REPORTING, RESULTING IN EFFICIENT AND PRODUCTIVE CAPITAL ALLOCATION, WILL ACT AS A FORCE FOR FINANCIAL STABILITY AND SUSTAINABILITY. How do organizations create value? The financial information covering both financial performance and risk, however, should serve as enough to support investment decisions reflect the integrated thinking and decisionmaking process within organizations KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 22 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

143 Corporate reporting; international evolution 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 23 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

144 Evolution of corporate reporting Beyond financial numbers Relevan information for investors - conectivity CSR reporting Annual Report Investor Presentations Reporting controls 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 24 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

145 Evolution of corporate reporting Beyond financial numbers Relevan information for investors - conectivity CSR reporting Annual Report +LOCAL Governance, risk and compliance New defintion of value +VALUE Investor Presentations + ONTIME Reporting controls Business model risk and opportunities - Outlook Governance Business model, long term strategy, performance and outlook 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 25 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

146 What is integrated reporting proposing? Four challenges for companies short term Different stakeholders need different information. Technology will solve the granularity issue. Comparability is a work in progress. Who manage the (r)evolution? 2014 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 26 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

147 The future of reporting? Investors Employees Corp Business units Clients Suppliers Neighbors Employees Administrations Premises/countries 2013 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 27 member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

148 if you don't know where you go, then the compass is useless José Luis Blasco Partner Head of Governance, Risk and Compliance Blog: KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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www.pwc.com.br The PECEX Method Comparison between Brazil and OECD approach Main aspects of Brazilian TP rules as compared with OCDE Guidelines: Sixth Method Few countries adopt the Sixth Method for commodities,